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The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates. Based on the

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The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates. Based on the pure expectations theory, is the following statement true or false? The pure expectations theory assumes that a one-year bond purchased today will have the same return as a one-year bond purchased five years from now. Faise True The yleld on a one-year Treasury security is 4.0000%, and the two-year Treasury security has a 4.8000% yield. Assuming that the pure expectations theory is correct, what is the market's estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) 5.6062% 6,3911% 4.7653% 7.1199% Recall that on a one-year Treasury security the yield is 4.0000% and 4.8000% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premlum, but the two-year security does and it is 0.3%. What is the market's estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) 5.0024%4.252%5.7027%6.353% Suppose the yield on a two-year Treasury security is 5.83\%, and the yield on a flve-year Treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market's estimate of the three-year Treasury rate two years from now? (Note: Do not round your intermediate calculations.) 6.45% 5.46% 6.61% 7.10%

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